2016 is a year of recovery for the diamond industry,
notes 2016 Bain & Company/AWDC report
Following challenging years in 2014 and 2015, the diamond industry now appears to be in genuine recovery, according to the latest annual report issued by Bain & Company and the Antwerp World Diamond Center (AWDC), entitled” The global diamond industry 2016: The enduring allure of timeless gems.”
The industry is rebounding in 2016, the report stated, noting that restocking by midstream players, following their inventory sell-off in late 2015, produced growth of around 20 percent in rough-diamond sales during the first half of the year. This followed a fall of 24 percent in rough diamond sales in 2015, which was the result of reduced purchasing volumes in the cutting and polishing sector and the release by the mining companies of about $5 billion of their inventories into the downstream markets.
But noted the Bain/AWDC report, the final growth trajectory for 2016 and the strength of midstream and rough-diamond sales in the beginning of 2017 will be determined by the performance of the diamond jewelry retail segment during the year-end holiday season.
However, while the jury is still out about the 2017 holiday season, initial signs are encouraging. According to the National Retail Federation and Prosper Insights & Analytics in the United States, more than 154 million American consumers shopped over Thanksgiving weekend, up from 151 million shoppers in 2015. The European Commission reported that Eurozone consumer confidence improved sharply in November, rising by 1.9 points to -6.1. The rise in confidence was greater in the European currency bloc than in the EU as a whole, which includes the United Kingdom. Eurozone consumer confidence has gradually improved over the last three months after falling significantly between May and June of this year.
The diamond industry may be poised for a modest rally, but, stated the Bain/AWDC report, several key headwinds persist. However, this is offset by the growing spending power of Millennials, as well as strong overall macro fundamentals.
The outlook for the diamond industry in the medium-term remains challenging, but over time the positive macroeconomic outlook is expected to work in the industry’s favor. Longer-term, the diamond market will trend in a positive direction.
Using a proprietary forecasting method, Bain projects that rough-diamond supply and demand will remain tightly balanced through to 2019-2020. Demand for rough diamonds is expected to return to a long-term growth trajectory of about 2-5 percent per year on average, relying on strong fundamentals in the United States and the continued growth of the middle classes in India and China.